Vistaprint 2014 Annual Report Download - page 35

1 - Net Promoter Score is based on a direct question: How likely is it that you would recommend Vistaprint to a friend or colleague? The scoring for this answer is
based on a 0 to 10 scale.
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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of the financial condition and results of our operations should be read
in conjunction with the consolidated financial statements and the notes to those statements included elsewhere in
this Report. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual
results could differ materially from those discussed below. Factors that could cause or contribute to such differences
include, but are not limited to and those discussed in the section of this Report titled “Risk Factors”.
Executive Overview
Through the use of our propriety software and principles of world-class manufacturing, we produce large
volumes of individually small, customized orders for a broad spectrum of print, signage, apparel and similar
products. We market to customers under the Vistaprint brand, as well as several brands through our Albumprinter,
Webs, People & Print Group and Pixartprinting businesses. These brands serve the needs of various market
segments including resellers, small and medium businesses with differentiated service needs, and consumers
purchasing products for personal use.
For the fiscal year ended June 30, 2014, we reported revenue of $1,270.2 million representing 9% reported
revenue growth over the prior year and 8% growth in constant-currency terms. During the fourth quarter of fiscal
2014 we acquired People & Print Group and Pixartprinting, two companies that help us reach differentiated
customers through distinct brands, and that we believe will give us access to a broader product offering over time.
Excluding these acquisitions, our reported revenue growth was 5% and our constant-currency revenue growth was
4% compared to the fiscal year ended June 30, 2013.
We believe our current revenue growth rate remains below our historical levels because we are in the midst
of a major transformation of our customer value proposition in our largest business, the Vistaprint brand. This multi-
year transformation began in 2011 and is intended to improve customer loyalty and long-term returns through
improvements to pricing consistency and transparency, site experience, customer communications, product
selection, product quality, merchandising, marketing messaging and customer service. Some of these efforts in
2014 created near-term revenue headwinds as we have moved toward industry-standard marketing and
merchandising approaches, reduced our use of free and deep discount promotions as tools for customer acquisition
and retention, and reduced our advertising spend as a percentage of revenue and in absolute dollars. In addition,
we have driven consistent pricing and discount levels across our advertising channels in three of our largest
revenue-generating markets, compared to our prior practice of offering different pricing and discount levels by
channel, which had the effect of changing the return profile of certain advertising channels. The combination of
these initiatives impacted new and repeat order volumes during the year, although they also contributed to an
increase in our average order value. We remain confident that these efforts will drive long-term value, as evidenced
by increases in our customer Net Promoter Score™1 around the world, and improvements in gross profit per
customer and repeat order rates in the test market in which we made similar changes over two years ago.
Diluted earnings per share for the year ended June 30, 2014 increased 51% to $1.28 as compared to the
prior year. This increase was driven by efforts to improve the per customer economics in our Vistaprint brand,
resulting in advertising leverage, as well as continued efforts to drive efficiency and effectiveness in manufacturing
and administrative areas of our business. These areas of leverage were partially offset by investments in product
quality and selection and software development. We have been successful in improving profitability and expanding
our margins despite the $12.7 million loss on the sale of our investment in Namex and its related companies and
approximately $5.9 million in transaction costs relating to our portfolio of investments during fiscal 2014. We believe
our investments over the past three years, as well as our recently acquired businesses, will collectively enable us to
scale and strengthen our competitive position and enhance long-term shareholder value.
Critical Accounting Policies and Estimates
Our financial statements are prepared in accordance with U.S. generally accepted accounting principles
(“GAAP”). To apply these principles, we must make estimates and judgments that affect our reported amounts of
assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. In some
instances, we reasonably could have used different accounting estimates and, in other instances, changes in the
Form 10-K